Yen Saw, CEO, Tokio Marine Insurans: Interview

Interview: Yen Saw 

How would you evaluate growth opportunities outside Kuala Lumpur and the Klang Valley?

YEN SAW: The focus of business has always been in central Kuala Lumpur, and it is logical to continue committing resources here. After all, the Klang Valley has always been integral for business activity and the centre for development and business deals. At the same time, this means that it is also highly competitive and saturated, as people are spoiled for choice and this makes business ventures highly fluid and competitive. Venturing out of the Klang Valley means that we are able to increase our business presence where we feel it has more impact that will translate into relevant, meaningful and significant business partnerships. We see strong potential for insurance growth in East Malaysia, as there is significant infrastructure development planned. Two of the five economic corridors in the country are based in East Malaysia and major development projects to strengthen economic activities in Sabah and Sarawak have been planned as part of the 2016 budget. East Malaysia constitutes 20% of the overall population and, while it is less populated and cosmopolitan than Peninsular Malaysia, it is also an area very rich in natural resources.

As the average life expectancy in Malaysia increases, what opportunities do you envisage for growth in the health insurance segment?

SAW: Medical insurance in Malaysia is still going through a state of evolution, and there needs to be a fair distribution of risk that we can model and price for. However, no matter how good your actuaries are, they can never accurately price for fraud.

Increased longevity, coupled with demographic shifts, have made Malaysia’s population steadily older and less healthy. With an aging society in need of more costly care, policy makers must find a way to resolve discrepancies in public and private care in a cost-effective manner. Government subsidies will continue, and an outlay as large as health care appears to be increasingly unsustainable if public hospitals and clinics become the source of care for most of the population. Over time, privatisation is a pragmatic approach for long-term sustainability. However, there need to be well-established guidelines for all stakeholders to minimise insurance fraud. Until this framework is in place, it is challenging to take this to the next level.

To what extent do you see technological innovation altering the insurance industry?

SAW: To see the internet as simply being a place from which one is able to distribute insurance products to customers is short-sighted. Financial technology (FinTech) companies use an interesting model where value is assessed by reach and volume. All FinTech companies aspire to be listed. They may not make money out of their products and they realise the quickest way to achieve reach and volume is to sell goods and services at very comparable rates.

The insurance sector must realise that competition is not coming from within, but rather from these Fin-Tech companies, through the creation of value propositions for the end consumer that offer below-cost insurance premiums. If we do not find a way to be more efficient and to adapt our business, these Fin-Tech companies will take our customers away. They do research pre-purchase, and through this research they make informed decisions. Then they buy. The internet has made this research easy and accurate.

A strategy whereby insurance companies work with FinTech establishments to sell their existing products may not lead to success either. At this juncture, we may even have to put aside value propositions and recognise how digitisation will affect the sector. The technology revolution is transformational, and everyone seems to want to “Uber-ise” their products. Fin-Tech innovation is challenging and altering the way we develop, transact and deliver financial products.